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Apr 13, 2012, 08.42 AM IST
Rashesh Shah chairman and CEO, Edelwiess Capital explained that the IIP had reached a bottom and expects it post a reasonable rise. He was positive that the RBI would spread its cut in rates across the year.
In his analysis of the economy in the light of the IIP data on CNBC-TV18, Rashesh Shah, chairman and CEO, Edelwiess Capital explained that the IIP had reached a bottom and expects it post a reasonable rise.
He also said that the slowdown in the economy still gtave enough room for the RBI to initiate a rate-cut. He was positive that the RBI would spread its cut in rates across the year.
Below is an edited transcript of his interview in CNBC-TV18. Also watch the accompanying videos.
Q: Let's start with the IIP figures which came out for February earlier on today at around 4.1%. What is your perspective on the revised figure of 1.1% for January? What you expect the RBI to move on?
A: The IIP has become fairly volatile during the last few months and is not becoming reliable. We think that the IIP will start to flatten out. A bottom is being created on IIP and we are hoping that maybe from end of this quarter, the index will start seeing a reasonable rise.
But the economy is slowing down and that effect of that will continue, but the rise in IIP has started. Fortunately, the optimism is not so high as to expect the RBI not to cut rates. The economy is starting to bottom out, but still there is enough incentive for RBI to cut rates, reduce cost of capital and improve liquidity.
Q: Are you expecting a rate cut now and how many more cuts do you think will follow?
A: The RBI has stated that it will follow inflation and during the last three months, inflation has been trending down. If you see the entire inflation trend, it has come down from a peak of 9.6 to 7 or so.
I believe that there is a high probability that RBI will cut rates in April because it has added that it will start to factor in growth in the planning for a rate-cut due to the effect of growth on the interest rates.
The fears of oil prices are also starting to subside and global investors forecast oil prices trending down. The Chinese economy is slowing down, so lot of commodity prices including oil prices, are coming down.
So, with falling inflation and assuming agriculture production and the monsoon is okay we should expect to see the cuts. But the cuts won't be rapid bit slow and gradual spread throughout the year.
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